Many on-line transactions that are completed using a computer require knowledge of the purchaser's actual location, identity and time, such as, for example, the purchase of controlled materials, cash transfer transactions, etc. Heretofore, in order to accommodate such transactions between remote locations, dedicated telephone lines or other secure communications systems have been required. However, as the Internet becomes the media of choice for many communications and commercial transactions, use of the Internet for transactions in which location, time and identity of the parties are required becomes problematic since prior to the present invention there was no way that the parties could be assured of the actual input time of the communication and the location of the other party.
One type of transaction for which the Internet appears particularly attractive is on-line gambling. However, gambling is a regulated industry all over the world. The regulations vary from total prohibition to nearly complete permissive wagering on almost unlimited subject matter. Today it is clear who has jurisdiction for both the establishment of regulations and their enforcement. In the USA, for example, the states have the authority, and the federal government supports the state's authority, to regulate gambling within its borders.
Some form of gambling is legal in all but two states; Utah and Hawaii. Currently, thirty-seven states permit state-sanctioned lotteries and twenty-three states have casinos, while others like California license card parlors. Seven states allow off-track paramutual betting on horse racing over the telephone. These activities are governed by a Gambling Commission established in each state, and the commissions govern the eligibility and licensing of all gambling players, games and businesses permitted to offer games in their state.
In 1976, the U.S. Congress appointed a National Gambling Commission to review the status of the then-current regulations. The Commission returned an endorsement of state sovereignty as to the issue. The few explicit exceptions were for gambling on Indian reservations, on cross-boundary waterways, and on commercial aircraft. The most frequently cited federal regulations are the Interstate Wire Act, 18 U.S.C. Section 1084, and the prohibition of illegal gambling businesses, 18 U.S.C. Section 1955. Both of these laws make federal crimes out of violation of state laws. Each is intended to support state enforcement of their laws.
Internationally, the scene is much the same; that is, the individual nation states regulate gambling within their borders. But there has to date been no successful regulation of gambling beyond a country's geopolitical boundaries. To avoid conflicts with the laws of a particular country, cruise ships that allow gambling are careful to be in international waters before they initiate game play. Jurisdiction is thus generally clear and there are usually few conflicts. The obvious conflicts have been covered domestically by federal laws.
It is important to note the importance of identifying both where the gambling occurs and who the parties (the host casino and the player) to the gambling activity are since it establishes both the legality of the gambling transactions and the jurisdiction for regulation and enforcement. This is of particular concern relative to remote gambling transactions made using a communication medium such as the Internet because one cannot always know where both the client (player) and the host server (usually at a casino) is located when the connecting medium is not "hard wire" connected from one end of the link to the other.
Today a player usually goes into a casino and walks around placing bets and playing games in surroundings that have evolved over many years. He knows where the casino is and the casino knows who and where the player is. Both parties have a sense of confidence that exposure of the transactions within the limits of the law are under control. Both parties know what it means to win and how the winner is to collect his winnings. Everything from access to cash, to knowledge of whether he wins or loses, is acceptably within the party's control or he doesn't play. It is therefore apparent that the security that physical presence in a casino offers versus electronically accommodated remote gambling, supported by bets delivered through electronic fluids transfer, is going to require an adjustment in thinking for both the individual gambler and the casino.
There are currently several individual websites which offer the opportunity to gamble on sports activities, various types of on-line games, and various types of lotteries. Payment for wins and losses are accommodated through use of deposit account and credit card transactions. The proprietors of such websites have taken the position that the gambling "transaction" occurs at the website, and so long as the "transaction" occurs within a jurisdiction where gambling is legal, the wagering, in their view, is legal. However, various state authorities have now taken contrary positions and it doesn't make any difference where the player is extant. In fact, during the past several years, several states have challenged such practices and legal battles in this regard persist.
In the world of the Internet, it is easy to disguise where the website computer executing an application, in this case gaming software, is located, and where the user, i.e., the player sending the transaction to the application, can be found. This means that one can "spoof" the computer at the gambling website into thinking that the remote player is in a venue where it is legal to play the game. Likewise, a website computer connected to the Internet can appear to be executing a game in a location where it is legal, while it is actually located in a jurisdiction wherein such gambling is illegal. In either case, both parties to the transaction may be subject to legal liability if one of them is a resident in a jurisdiction where cross boundary gambling is not legal. Furthermore, in use of a communications medium that is subject to transmission delays, it is possible to change the apparent time of day of the player input to the extent that one could make a play after the legal period for wagering has expired, and yet appear to have entered his bet within the legal time window. This of course makes such play ripe for fraudulent opportunity. There is presently no facility on the Internet to preclude such actions. The Internet is presently used in innumerable non-wagering transactions; thus, any solution that is developed and used in the future must not be perceived as compromising in any way the fundamental assumed rights of the general Internet community.
Remote communication problems, in addition to party location and time of transactional activities that will require solutions in the gambling industry, be it through use of the Internet or any other communications medium, are authentication (identification) of both the casino and the player, privacy of the results of the transaction, security for the games to preclude tampering, and protection against unauthorized access to a player's financial accounts. Although some communications links, such as hardwire connections between remote terminals, are more or less secure, the Internet, in its current implementation, is not designed to be restrictive in any way; in fact, quite the opposite is true. It is probably the least restrictive communications medium in the world. It is also true that any action that may attempt to restrict a user's freedom on the Internet is met with massive resistance. Therefore, a solution to identifying the name and location of a player, and the name and location of the casino, as well as the security of the communications between them, must be carefully constrained to apply only to those who want or need to use it.
It will thus be appreciated that although licensing and taxing is normally done by local or state governments, and regulation is normally enacted at state and federal levels in the U.S., and at the nation's state level internationally, the application of regulations is geopolitical. And such regulations typically apply to the casino, the player and the type of game. To enforce the regulations, it is thus axiomatic that the physical location of both the player and the gaming establishment must be known. Furthermore, transactional legitimacy also requires the establishment of both the time and date of each transaction as well.